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Tax Comparison Seniors Investment Income 2019

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Personal Tax  -> Dividend tax credits -> 
Tax Rates  -> Tax Comparisons  ->  Tax comparison for seniors with investment income -> 2019

2019 Seniors Tax Comparison: Canadian Dividends vs Other Investment Income

The table on this page compares taxes payable by province in 2019 for two different types of income:

bulletCanadian dividends eligible for the enhanced dividend tax credit, and
bulletother income, such as interest and foreign dividends.

To the above income we add:

bullet$7,253 of OAS - this is the annual max for 2019, based on Jan-Sep 2019 rates
bullet$8,400 of CPP retirement income
bullet$24,000 of pension income that is eligible for the pension income tax credit

The calculations assume that the income is received by a single senior. The tax rates used are as known on July 25, 2019.

Notes:
     - The clawback of OAS reduces taxable income, and is included in taxes payable.
     - BC taxes payable do not include MSP premiums because they are eliminated in 2020.
     - Ontario - includes Ontario Health Premium.
     - QC includes health contribution, contribution to the health services fund, and prescription drug insurance plan premiums.

Income
Type
Annual
Amount
OAS $7,253
CPP 8,400
Eligible Pension Income 24,000
Total before investment income   $39,653

The first comparison uses $30,000 of eligible dividends compared to $30,000 of other income.

Income
Type
Annual Income
Case A
Dividends
Case B
Interest
Income from above 39,653 39,653
Eligible Dividends 30,000 nil
Interest Income nil 30,000
Total Income 69,653 69,653
Gross-up 11,400 nil
OAS Clawback -521 nil
Taxable Income 80,532 69,653

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/
Territory
2019 Taxes Payable Case B
Increase
in Taxes
Increase
as % of A
Case A
Dividends
Case B
Interest
AB 7,747 13,924 6,177 80%
BC 5,920 12,840 6,920 117%
MB 11,553 16,238 4,685 41%
NB 8,779 16,170 7,390 84%
NL 12,998 16,512 3,514 27%
NS 11,992 17,022 5,031 42%
NT 4,996 11,947 6,951 139%
NU 5,542 10,325 4,784 86%
ON 7,534 13,682 6,148 82%
PE 10,891 16,644 5,752 53%
QC 12,547 17,875 5,328 42%
SK 8,601 15,017 6,416 75%
YT 5,983 13,098 7,115 119%

You can see above that in BC and a couple of the territories, more than double the income tax is payable with interest instead of eligible dividends.

The next comparison uses $50,000 of eligible dividends compared to $50,000 of other income.

Income
Type

Annual Income

Case C
Dividends
Case D
Interest
Income from above 39,653 39,653
Eligible Dividends 50,000 nil
Interest Income nil 50,000
Total Income 89,653 89,653
Gross-up 19,000 nil
OAS Clawback -4,661 -1,811
Taxable Income 103,992 87,842

The following table compares the taxes payable on the above incomes - the taxes payable include any applicable OAS clawback.

Province/
Territory
Taxes Payable Case D
Increase
in Taxes
Increase
as % of C
Case C
Dividends
Case D
Interest
AB 12,779 21,787 9,009 70%
BC 11,366 20,367 9,001 79%
MB 18,872 25,306 6,433 34%
NB 14,157 24,873 10,716 76%
NL 20,807 25,605 4,798 23%
NS 18,996 26,043 7,047 37%
NT 10,424 19,660 9,237 89%
NU 11,513 17,548 6,035 52%
ON 13,678 21,647 7,969 58%
PE 17,357 25,628 8,271 48%
QC 20,061 26,961 6,900 34%
SK 13,943 23,238 9,295 67%
YT 11,366 20,856 9,490 83%

Although the higher taxable income with Canadian eligible dividends causes a clawback of the OAS and a higher clawback of the age credit, the taxes payable are still significantly lower.

To see the tax results for your own income situation, and how it would change if the type of investment income changes, use our Detailed Income Tax and RRSP Savings Calculators, and our very simple Investment Income Tax Calculator.

See also Tax Comparisons by Province and Territory, which compare different levels of employment income for people who are not seniors.

Tax Tip:  Although Canadian dividends increase the OAS clawback, the net tax payable is still much less than with interest or foreign dividends.

Revised: July 29, 2019

 

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